ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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An Empirical Investigation of Real Farm Incomes across Indian States between 1987–88 and 2011–12

Using the unit-level data from various rounds of the Employment and Unemployment Survey of the National Sample Survey Office, the first consistent time series of the average real farm income per cultivator for 18 major Indian states for 1987–88, 1993–94, 1999–2000, 2004–05, 2007–08, 2009–10, and 2011–12 is presented. Using this data, two sets of issues are studied. First, how did real farm income evolve across these 18 Indian states? Which states have high levels and growth rates of real farm incomes? Is there any evidence for convergence of real farm incomes across Indian states? Evidence for unconditional convergence is found, which suggests that the states with relatively lower farm incomes have, on average, grown at relatively faster rates. But the tendency towards convergence has not been strong enough to change relative rankings of states (by real farm income per cultivator) in any significant way. Second, did the market-oriented reforms of agricultural marketing systems increase real farm incomes? It is found that market-oriented reforms did not increase real farm incomes.

In India, a significant part of agricultural marketing has been traditionally organised through state-controlled markets (Agricultural Produce Market Committee [APMC] mandis). Since the early 2000s, there has been a move to gradually allow private capital more space in agricultural produce markets. The Bharatiya Janata Party (BJP)-led government tried to centrally legislate this move towards privatisation of agricultural produce markets with three hastily passed, controversial farm laws in September 2020. A year-long protest by farmers forced the BJP government to repeal the laws in November 2021.

Underlying such attempts to allow more space to private capital in agricultural marketing is the notion that moving away from the state-controlled marketing system, that is, market-oriented reforms of the system, is beneficial to farmers. There is surprisingly little evidence to back this widespread notion. Part of the reason for this lack of evidence is that there does not exist any consistent time series of real farm incomes at the state level over long periods of time (Chand et al 2015). The first contribution of this paper is to construct consistent estimates of average real farm incomes for 18 major Indian states between 1987–88 and 2011–12.1

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Updated On : 11th Jul, 2022
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